Sep 092007
Authors: John A. Straayer

Several Collegian columnists have written recently about higher ed finances as they impact Colorado State University and its students. Nick Hemenway suggested that our colleges and universities got the short end of the deal on the distribution of Referendum “C” money, Sean Reed made reference to a 5 perecnt tuition increase and Seth Anthony wrote that undergraduate resident students now pay almost $300 more per semester. Never mind that, in combination, Reed’s 5 percent and Anthony’s $300 don’t compute; in this piece I’d like to comment on Referendum “C.”

As Hemenway wrote, Colorado voters passed “C” in 2005 to suspend TABOR’s limitation on the amount of revenue, which the state may keep and spend. The cap, which was the allowable general fund revenue total for the prior year plus increases for inflation and population growth (pupil increases for K-12), was suspended for five years. Additionally, the “ratchet effect” was eliminated and the base upon which allowable revenue per year is now set at the highest total for any prior year, not just the immediate past year, as before.

When the 2001 recession hit, state revenues plummeted and appropriations were, of necessity, cut. K-12, which commands the single largest slice of the state budget, was protected by the 23rd Amendment. Cuts in corrections were minimal since you can’t just open the prisons or stop feeding inmates, and Medicaid spending is, in large measure, driven by federal law. So what to cut? Higher ed, which is unprotected constitutionally, by federal law or, by and large, politically, took it in the shorts.

But when the economy recovered and revenues began to flow again, the amount the state could spend was locked down by TABOR since the low-revenue recessionary years set the new and much diminished base for calculating allowable spending.

Referendum “C” unlocked that lid so for five years the state could keep and spend what the economy and taxing system brought in. During the campaign, proponents promised that the extra revenue, which “C” made available, would be split three ways – education, higher education and health programs.

So what happened? Most importantly, Referendum “C” made it possible to avoid further cuts. Had “C” not passed, TABOR’s cap would have necessitated ripping another $400 million from state appropriations with the major portion coming from an already cash-strapped higher education system. Beyond that, the three targeted areas – higher ed, K-12 and health programs – did receive increases.

However, not all the new money went to higher ed, K-12 and health programs; a sizeable chunk went to transportation and other capital projects. But this was not because, as some have suggested, money “was wasted,” or “flushed down the bureaucratic toilet” or simply misappropriated by incompetent politicians.

It happened because our politicians in Denver followed the law. Good for them!

Prior to TABOR the legislature enacted a 1991 statute (named the Arveschoug-Bird amendment after its legislative sponsors) which limits general fund spending to 6 percent over the prior year; it does not, however, limit capital spending-spending for facilities and durable equipment, for example. When TABOR passed (1992), it locked into the state constitution all previous existing fiscal limitations. Some folks, including me, argue that the legislature may legally suspend the 6 percent limit but other legal minds disagree, so the 6 percent limit is honored.

Other laws enacted by our General Assembly provide that beyond certain specified revenue levels (“triggers” as they’re called), money then flows to “capital” project spending – mostly, but not exclusively, highways.

So again, what happened? Since the passage of Referendum “C,” revenues have been sufficient to avoid further budget cuts, and some new money has gone to higher education, K-12 and health programs. Since passage of “C,” revenues have exceeded 6 percent over prior-year general fund appropriations. As per “C,” the state may keep all the money. But as per the Arvescoug-Bird provision, it may not appropriate beyond an additional 6 percent for non-capital purposes.

This is both bad news and good news for Colorado State University and its students. On the one hand, absent the 6 percent limitation, we’d have more money and perhaps (stress perhaps) tuition would be held down. The 6 percent limitation, thus, is the bad news. The good news is that the excess beyond 6 percent is going to transportation and other capital projects. Thanks to this revenue excess, you may (stress “may”) still have a useable highway on which to drive to school and when you arrive there will be buildings with roofs and stairs and chairs and heating systems.

But the really, really bad news – besides the fact that Ref. “C” runs out soon while higher ed, heath programs, transportation and corrections are still dirt poor? Colorado has, arguably, the most screwed up fiscal system in the nation with constitutional provisions which both require spending and limit revenues. Further, it is now all but impossible for citizens to understand the convoluted constitutional fiscal maze which their own votes created. It’s not easy to follow either the law or the money, but we’ll keep trying.

 Posted by at 5:00 pm

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